The recent summer budget was not predicted to affect contractors or freelancers greatly following six years of almost complete ignorance by the chancellor. In recent years, not much has been worth getting excited about as only minor changes such as tax cuts and business support schemes took place.
When the Conservative government was elected, their proposed plans included low tax and small business support therefore it produced an uninvited surprise when George Osborne released proposed changes including the removal of Employment Allowance for one-person limited companies and tax on dividends would rise sharply. The result of these includes increased tax bills and fewer support schemes for one-person businesses as of April 2016. This has caused questions towards the Conservatives as this is not what individuals elected for.
These changes have been branded an ‘attack’ on entrepreneurialism and enterprise for small and medium-sized businesses who could possibly view tax breaks from paying dividends as a technique to resolve imbalance as they have took the risk of setting up a business and employing others. Furthermore, throughout David Cameron’s election campaign, he claimed his government would ‘give as much, if not more, attention to small and micro businesses as we give to large corporations’ although it is now clear that he did not intend this to be positive.
Subjects the Conservatives would have to consider to prove to be the correct party for micro-business’ include:
The previous time the legislation was altered, it was so catastrophic that the changes were scrapped around a year later therefore why they are considering changes again.
This has affected contractors for over 15 years now and has cost contractors hugely. Although contracting should be the most flexible workforce in the country, this legislation prevents this for reasons including: contract reviews, status investigations and comfort letters. These all delay work causing costs inflation and reducing contractor benefits.
The SME Legislation
The Agency Worker Regulation was introduced in 2010 in an attempt to protect low-earning agency workers. However, many high-paid contractors and freelancers were involved despite not requiring any protection.
Furthermore, when HMRC launched the Real Time Information (RTI) system two years ago, their awareness campaign was specifically focused on payroll companies and large corporates although one month previous to the launch, only 20% of micro-businesses confirmed they were prepared.
In addition to this, when EU VAT rules were introduced in January this year, exemptions for small businesses were forgotten therefore many sole traders selling apps and eBooks had the same requirements as Google and other big companies.
Late payment terms
You’d expect any company with business dealings with another company would be interested in them staying afloat. Although this isn’t the case especially with large corporations such as Tesco who impose troublesome terms for payments on small suppliers.
25% of failed businesses will have failed due to cash flow problems which can easily be resolved by the use of friendlier payments terms. This would benefit one-person businesses the most as they have the least time for credit control although require money more than anybody else.
If they are able to find a solution that solves this issue, the Conservatives with surely win votes from small businesses in 2020 as well as a clear reason for George Osborne to boast about at the following Budget.
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